External manager structure still optimal: FuturePlus

Superannuation funds that look to scale to reduce fund manager fees may be disappointed, according to FuturePlus chief executive Madeline Dermatossian.

Dermatossian said that although funds have looked to merge to reduce overall fees, fund managers would just be charging a percentage on a larger pool of money.

"I don't think scale is going to reduce fees that much - it's just a bigger pot of money," she said.

Internalising investment operations on the basis of reducing fees could also prove inefficient, she said, as it would inevitably lead to a hybrid model where the internal team was dependent on external fund managers for guidance.

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She questioned how many specialist fund managers super funds would need to in-source, saying fees would "sky-rocket" compared to leveraging off an external fund manager.

"I don't think that hybrid model…is going to be any more effective than having it as a totally outsourced function.

"You may need one or two internal analysts for forwarding, rebalancing, reviewing and those sorts of administrative tasks - but unless you're prepared to in-source the entire funds management function, I don't think that that's essentially going to lead to cost savings," she said.